Given everything that is going on in the capital markets these days, i'm curious where people think the future will be going for various debt funds.
- What types of deals will be getting done?
- How will repo-lenders and the re-pricing impact deal flow?
- Are the funds who are un-levered in a better position?
- What signs do you look for to see if various shops can weather the storm?
I ask this for two reasons. The first being general curiosity of how people are even approaching evaluating deals these days/and how you price it. Secondarily given how hot the market has been for hiring, how would you advise someone thinking about making switch from one job to another when there is potentially a lot of uncertainty in the market?
Given various debt funds have different return requirements, it would be helpful to have a sense for knowing what kinds of deals fit your bucket of capital when you respond to see how various people are seeing/thinking about things.
Also curious how agency volume is looking these days given DSCR requirements and more importantly their exit stress tests. Has volume dropped and/or are you seeing Sponsors putting in more equity?
Slowed down significantly but since our shop has a pretty robust balance sheet, we are busy doing balance sheet deals for our agency clients. Funny thing is that all our agency competitors are also sending us balance sheet requests, so I know the market has turned for them as well. Let's see if the agencies come up with a value add program to compete.
What are the typical metrics of the deals you guys are currently doing? Mostly for institutional clients? What about lending parameters (ltv, rate, etc.)?
I mean if you assume a 5% rate at exit (3% index, 200 spreads), and look to have a 1.25x DSCR on a 30-year amortization, then you basically need an exit debt yield of like 8%. I'm not sure how many people buying 3-4 cap core type apartment deals that have an exit debt yield of 8%...
Incoming CRE debt intern here, would you mind sharing how did you get to that 8%? Shouldn't the debt yield be equal to 1.25x*(500bps+1/30) (~10.4%)?
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